Hostess to fire 18,000 workers, close

Hostess Brands Inc., the bankrupt maker of Wonder bread and Twinkies, said it will fire more than 18,000 workers and liquidate after a nationwide strike by bakery workers crippled operations.

“Companies in bankruptcy don’t have any margin for error,” Chief Executive Officer Gregory F. Rayburn said in an interview Friday with Betty Liu on “In the Loop” on Bloomberg Television. “We just didn’t have enough workers crossing the picket line.”

The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos was undone by the strike after changes in American diets led to years of declining sales while ingredient costs and labor expenses climbed. The decision to liquidate capped a weeklong standoff between the company, once the largest U.S. wholesale baker, and a union that called its proposed labor contract “horrendous.”

Rayburn said Hostess will dismiss most of its 18,500 employees and focus on selling assets. Shipments of bread, snack cakes and other products will continue until supplies run out, he said. While Hostess has fielded interest in pieces of the business, its labor contracts and pension obligations have deterred any bids for the whole company, Rayburn said. The company’s brand names include Dolly Madison, Drake’s, Merita and Butternut.

Twinkies and other Hostess brands will probably disappear from the marketplace, said Tim Ramey, a Lake Oswego, Ore.-based analyst for D.A. Davidson & Co. Any buyer would need a distribution system, he said.

“Without your own distribution, it’s pretty problematic,” Ramey said by telephone Friday. “Twinkies has been on a slow death spiral for a long time. Somebody might decide they want something to do with it, but it’s not likely.”

The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike Nov. 9 after a bankruptcy judge in White Plains, N.Y., imposed contract concessions opposed by 92 percent of the union’s members. The union represents about 5,000 Hostess workers.

“The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share,” the union said in a statement Thursday. Hostess “attempted to resolve the mess by attacking the company’s most valuable asset — its workers.”

In the past 15 months, Hostess has unilaterally ended contractually obligated payments to the workers’ pension plan and demanded cuts of as much as 32 percent in wages and benefits, the union said in the statement.

Hostess, based in Irving, Texas, asked a bankruptcy judge Friday to hold a hearing on Monday to approve the company’s request to close its 33 remaining bakeries and 565 distribution centers. Some workers will be retained to clean plants and mothball equipment, Hostess said.

Officials of the International Brotherhood of Teamsters, representing about 6,700 Hostess employees, were “incredibly disappointed” and “angry” about the shutdown, Rayburn said. The Teamsters union urged the bakers’ union Thursday to let members decide by secret ballot whether to continue the walkout.

“The company has clearly been mismanaged for some time,” the Teamsters said in a statement Friday. “Unfortunately, the company’s operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive.”

Drivers represented by the Teamsters earlier ratified a new contract with 8 percent in wage concessions and 17 percent in benefit reductions. Teamsters members “understood what was at stake and voted to protect all jobs at Hostess,” the union said in its statement.

Hostess closed three of its 36 plants permanently Nov. 12, blaming the strike. The company said it determined Thursday night that not enough employees had returned to work to restore normal operations.

Bakers’ union members “crippled the company’s ability to produce and deliver products at multiple facilities,” and “bakery operations have been suspended at all plants,” the company said in a statement.

Hostess filed under Chapter 11 for a second time in January, listing assets of $982 million and liabilities totaling $1.43 billion. Rayburn, who previously helped to guide companies including Syntax-Brillian Corp., Indianapolis Downs LLC and Sunterra Corp. through bankruptcy, was hired as chief restructuring officer in February and named CEO in March.